Quick and Dirty Guide to Evaluating Web Creative

Posted by on July 15, 2011

A lot of people don’t know how to evaluate web creative, so here’s a quick and dirty guide.

Before You Begin
First of all, go back and read the creative brief with a highlighter. Highlight the communication objectives and what the brand is all about. Put the highlighted portion of the brief to the right of your computer (assuming you are right handed).

Now look at the comp. Comp stands for “comprehensive” – meaning all the copy and artwork is supposed to be in the right place in the layout … but not necessarily all the copy and artwork will be final. In fact, with a web design at the comp stage the majority of artwork is close to final … except for “spot visuals” such as screen shots and masthead visuals. Copy may or may not be final – as copy is easy enough to change on the web.

Evaluation Proper
The 10 Questions You Must Ask When Evaluating the Home Page

  1. Can I immediately tell what this company does?
    The number one complaint end users have about a home page is that they get there and can’t tell what the heck a company is all about. Google also optimizes its search around finding copy that describes the company.
  2. Is there a strong brand impression?
    If I took the logo off and put my competition’s logo in its place would it look “right” or “wrong”. (Hopefully wrong – a strong brand impression would make anyone else’s logo look dead wrong.)
  3. Does the page have stopping power – in 3 seconds or less?
    The average visitor to your website makes a decision to stay on your page or go elsewhere in 3 seconds or less. So your home page has to stop visitor in their tracks and convince them – in 3 seconds – not to click elsewhere.
  4. Is there a well-thought out information architecture?
    The information architecture should be apparent from the home page. The best way to do this is with simple, straightforward navigation. I can’t emphasis this enough. Put the pages that you want most people at the first level of navigation and pages of somewhat less importance at the second level.
  5. Is the page set up with SEO in mind from the get go?
    There should be news and other text-based content that changes frequently on your home page; Google and other search engines put a premium on timely content.
  6. Attention to the basics
    Navigation needs to be simple and straightforward and remain consistent through out the site. There needs to be navigation on the top and bottom of the page. Your logo needs to appear in the upper left-hand corner. Ideally, you should have some branding on the bottom of the page. In most states, California included, you need a Privacy Policy. An “About” page is expected and should appear on your bottom navigation bar. Likewise, a Sitemap is expected and should appear there. Trust me … these are standards. Violate them at your own risk.
  7. Does the copy pull the visitor through the page?
    Are there headlines and subheads to break up the copy into chunks? Are the sentences short? Are there visuals with captions? Is there enough copy … you want to make sure there is enough copy on the page that the page gets indexed by Google? Are you using h1 – h6 tags appropriately for the different types of headlines (again, Google likes these)? Improve readability by using dark text against a light background whenever possible.
  8. What are the main messages being communicated?
    Do they align with the brief? Are they simple and clear? Are you being redundant on purpose? In today’s cluttered environment, it really helps to say the same thing the same way multiple times. Are you using images with words to make your message faster to process? The brain processes pictures faster than it does words – so for a quick read, use visuals with captions.
  9. Are there strong, benefit-oriented calls to action (CTA)?
    These are things that you want visitors to do when they come to your website – beyond clicking to go deeper into the site. For example, contact us to get a demo. Are the CTA simple and clear? Do they align with your business / marketing objectives?
  10. Have you avoided the kitchen sink?
    Don’t try to cram everything you want to say into your home page. It rarely works. Instead, work backwards from the analytics you will use to measure success.

    Most professionals measure success on the web with detailed analytics that tell them – among other things – the abandon rate (how many people jumped off their home page immediately) as well as the average number of pages viewed and time spent on the site. The quickest way to get your abandon rate up is to make your home page a jumbled mess, packing it with every single message you can think of. (“Everything including the kitchen sink.”)

    Likewise, if you are going to measure success by time spent on the website (the more time the better) and number of pages viewed (the more pages, the better as this gets to depth of engagement), you don’t want a “kitchen-sink” home page.

Final Words
Don’t reject creative out-of-hand just because its look and feel is radically different than what you were expecting to see. The difference between good creative and great creative is that great creative challenges our expectations. That said, navigation is not an area where you want to spend a lot of time pioneering new ground. The rule with navigation – as it is with other UI elements on the web – “don’t make me think!”.

Comments: 1 Pin It

Does Marketing Matter or is it Increasingly Irrelevant?

Posted by on December 24, 2005

Here at Open Marketing, we’re kind of known for asking the big, hairy, audacious questions. You know the kind of questions I mean. The ones everyone is afraid to ask. But that tend to linger long after you thought the discussion was over … the proverbial “elephants in the room”.

One of those questions is whether marketing even is relevant in today’s times. A startling number of start ups are finding their way to market without the benefit of a marketing VP, something unheard of during the last bubble.

 

Web 2.0 Start ups

In actuality, marketing matters more and not less than ever before. Web 2.0 start ups may well be an anomoly. Let me explain. In a start up, often the Chief Marketing Officer is the CEO. After all, in a start up the most important thing—often the only thing that defines success or failure— is to figure out if there is market for your product or service. Many great companies have been founded, gotten funding, and attracted a brilliant executive team only to bite the dust some 2, 3, or 5 years later. Why? The product or service provided turned out to appeal to too few customers. So figuring out how to craft the company’s offering to appeal to the maximum number of customers is the key job of the CEO in the early days of a company’s lifecycle, a job you can’t necessarily delegate. (Thankfully, you can ask for professional help … either by hiring in a VP of Marketing or by hiring on a consultant or two.)

Extreme Competition

The more established your company, the more likely it is that marketing is a key source of competitive advantage. Why? Because of extreme competition. Extreme competition is a term that got introduced into the business lexicon courtesy of the nice folks of McKinsey Consulting. It is characterized by an oversupply of almost everything. Labor is cheap. Technology is ubiquitous. The economy is now global, making it imperative that companies locate manufacturing plants and R&D centers based on these fundamental economics. In these “white knuckle” times, the one thing not in oversupply is customers.

Companies that declare that they are now customer focused due to a recent investment in CRM software are not telling us anything new or very different. The reality is that every company must focus on its customers (getting customers, keeping them, and growing them in value) to survive and prosper.

Suddenly marketing matters. Not just to marketing people and their agencies but to CEOs, CFOs, and their Board of Directors (BODs). Companies that figure out how to market better—that is more efficiently, effectively, and by bringing new products to market that gain rapid customer acceptance with superior margins—will consistently outperform their peers. In other words, they’ll get—and keep—competitive advantage.

Competitive advantage comes to companies that not only make marketing matter but that also build continuous improvement and learning into the systems that they use to manage marketing performance.

This is our vision here at OpenMarketing and one we look forward to sharing with you should you become our client.

Comments: 0 Pin It

Just what the Doctor Ordered: an Extreme Makeover for Marketing

Posted by on October 11, 2005

Presentation given at SoftSummit, October 11, 2005 (Santa Clara, CA), a conference sponsored by Macrovision maker of Installshield and attended by some 1,000+ independent software vendors

Argues that today we live and work in a time of extreme competition where products and brands are in excess supply. As a result, the traditional model of marketing—which is advertising centric—no longer fits. The alternative is to move towards a new model, one that represents an “extreme makeover” for marketing based on what we know works from direct marketing and marketing science.

download powerpointSoft Summit Presentation

 

Comments: 0 Pin It

Three strategies to improve campaign ROI

Posted by on May 17, 2005

There are three main ways to improve campaign ROI within a customer segment:

 

Today, it is not uncommon to have the cost of new customer acquisition exceed what you will see in profits off the first purchase from a new customer. The way the major networks and publishers are pricing advertising vehicles has a lot to do with this.

So one way to improve ROI is to look at ways to reduce new customer acquisition (NCA) costs.

Many clients start out thinking that direct marketing and even some forms of interactive advertising are more expensive for NCA purposes than advertising. They are right on this, but only to a point. Often this misperception happens because clients are relying on the wrong metrics. “Cost per” calculations look only at the cost of a given media but do not look at the revenue or contribution side of the equation. The result is that you are constantly spending less to bring in more and more customers. The customers you get may be very poor quality, however, and eventually this destroys your franchise, or the ability of the business to drive repeat sales year after year.

A better strategy is to build a Market-Mix Model and determine the optimal mix of media that will drive new customer acquisition costs down while optimizing your total return on customers.

With these models in hand, we can quickly see that while advertising looks less expensive initially on a “cost per” basis, advertising does not always work so well when it comes to acquiring high value customers, the kind of customers why buy from you once and again. With business-to-business clients, we generally find that the least expensive way to create new customers is using key words followed by properly targeted direct marketing. General advertising runs a poor third to these media choices.

In most market sectors, marketing ROI is heavily influenced by what happens after the initial purchase. To increase ROI, look for ways to reduce the purchase interval between the first purchase and the next sale (“R” or recency), to encourage customers to buy more often (“F” or frequency) or to increase the size of the average sale by migrating customers to more expensive products in your portfolio (“M” or monetary value). Likewise, anything you can do to increase the likelihood that a customer will stay with you beyond the initial sale will increase the return on investment.

Originally published on Firewhite Consulting site, 5.05.

Comments: 0 Pin It

Why your next agency is likely to be a consultancy

Posted by on March 13, 2005

Funny thing.  Our phones are ringing again, for the first time in a long while.  I guess this means that the great recession of 2001-2004 is finally over.  Clients are starting to wake up from the big slumber, stretch, scratch themselves, and reach for the phone.  They’re calling us and folks like us, not only to figure out where they should put their marketing dollars but also to help them find new sources of growth.  This observation has been confirmed by no less than the Harvard Business Review (HBR) which recently wrote a nice article about the merits of outsourcing certain marketing functions to folks like us.

“A discipline that was once principally creative has become increasingly analytic, as the old workhorses — print and television advertising, and direct mail — become less and less effective.”  — Gail McGovern and John Quelch, Harvard Business Review March 2005

The HBR article validates what we’ve been doing for the past 32 months, which is building a consulting practice that focuses on the chief marketing office (CMO) as the person at the company in charge of getting customer insight and using that insight as a launching pad to find growth opportunities for the business as a whole.  The HBR article is remarkable because it uses the “O” word – “O” as in outsourcing.  Turns out marketing people have always outsourced major parts of the marketing function. Who knew? Well, we did, actually.

Advertising agencies – for example – are typically hired to oversee branding, positioning, and messaging work as well as create advertising and place it in specific media. 

Agencies have long been considered strategic partners.  Unfortunately, the last 3-4 years have seen clients significantly decrease the compensation they are willing to pay their agencies.  Prior to the year 2000, a profit margin of 15-20% was the norm for an agency.  Nowadays, most agencies consider themselves lucky if they can earn a profit margin of 10-12%. 

Some of this is the agency’s own doing.  It used to be that agencies marked up the services, media and people they provided to clients by 17.65%.  Today, most of the major agencies no longer plan or purchase their own media, instead working through one of handful of media buying companies such as Carat1, Initiative, Mediacom, Mindshare2, OMD3, Starcom4, Universal McCann5, or Zenith Optimedia and give the agencies no latitude for markups.  It is as if one day agencies woke up and found that half of their revenue stream had suddenly vanished.

The other half of the agency’s fee structure is likewise under attack by clients who find themselves struggling to compete in today’s hypercompetive6 global market.  As a result, the 17.65% markup that use to be the norm is normal no longer.  Major clients like Microsoft and Charles Schwab typically end up paying much less than this, in the neighborhood of 10%. Nice neighborhood to be in if you are a client, but close to the poverty line if you are an agency.

To survive, agencies have to cut their costs, and anything that clients won’t pay for is gone. Most clients pay for advertising to be developed, so of course creative functions like art direction, copy writing, print production, and the like stay. Strategy was typically something agencies didn’t charge for in an explicit way.  It was a freebie. But in professional services, you are what you bill for.  And increasingly that means that agencies are firing senior staffers, particularly those whose roles were strategic, and replacing them with more tactical players who are a) less expensive people and b) spend the majority of their time managing projects vs. building strategies.  This leaves the agencies leanly staffed and profitable within the confines of a 10% markup.

Recognizing this situation for what it is — agencies are no place to go for strategy — savvy and forward-looking clients are beginning to turn to consultants to help them build strategies to accelerate growth.  One way to accelerate growth is to look at the various types of customer you sells to, their wants and needs, and how exactly your company satisfies these wants and needs.  In other words, do a needs-based segmentation.  When we do segmentation work, we rely on heavy-duty statistics, build models based on multiple variables, and make sure the segments we find are actionable from a marketing perspective.

Depending on the assignment, we may even expose various segments to different pricing scenarios to discover whether some segments are more or less price-sensitive than others.  Additionally, we’ll test different value propositions with different segments. This way, we can uncover entirely new business opportunities that the client didn’t even realize existed.  Once we find a handful of price and/or value propositions that look like winners, we will test them in market by developing an appropriate, statistically-based test-and-learn plan.  We’ll work with the client and their agencies to ensure the execution of the test-and-learn plan is “clean” and will result in data that we can use for decision-making purposes. 

Agencies would love to do this work – but they can’t, for two reasons.  First, the kind of project we are talking about is all “left brain” activity and agencies – at least the good ones – are “right brain” driven.

Left Brain Right Brain
Logical Random
Sequential Intuitive
Rational Holistic
Analytic Synthesizing
Objective Subjective
Look at parts Look at whole



A few of the bigger advertising holding companies are trying to build ancillary businesses around consulting but few have succeeded.  The ad industry is still smarting from the debacle that was Ammirati Puris Lintas — a highly respected firm that hired Rick Hadala from McKinsey as its CEO — to disastrous results.  Ammirati Puris Lintas is now basically gone, disemboweled and absorbed into Lowe & Partners.7

People who followed the matter will tell you that the two cultures – consulting and advertising – simply did not mix. It’s hard to be creative. It’s hard to be analytic. It’s impossible to be both.

Agencies can’t do this work for a second reason — they simply don’t have the right people with the right skills standing by.  Nor do most clients.  Harrah’s has an ongoing investment in customer marketing and analytics and as such has stepped up hiring of analytically-based MBAs into its training program from 10 per year to 25 per year.  To which we say, Harrah.  GE is well known for worshiping at the altar of Six Sigma management.  As a result, all employees–not just some of them–receive hours of classroom instruction on how to collect and analyze data.8 (A popular saying around GE is this one:  “In God We Trust. Everyone Else Bring Data.”)

But both Harrah’s and GE are anomalies.  Most of the CMOs we talk with day in and day out don’t have a team of analysts they can rely upon.  CMOs are comfortable and know how to hire ad agencies.  They’re a lot less comfortable with hiring consultants.

Comfortable or not, the next set of resources CMOs are likely to need are not going to be found at one of their agencies.  A recent study sponsored by the ANA and Forrester Research found that CMOs are stepping up their investments in accountability, particularly when it comes to marketing mix modeling and understanding of customer profitability and valuation and for these kinds of tasks they will look to outside measurement firms (a.k.a. consultants) to do the work.9  The majority of CMO’s surveyed won’t be looking to outsource this type of initiative to an existing agency partner.  Doing so would be tantamount to asking the fox to stand guard over the chicken house.  Sure, you could do it.  But why take the risk?

It’s tempting to hope that you can sidestep the consulting phase and instead go directly to a technology solution.  As we learned with CRM, this is simply not possible.  No system for MRM or “marketing resource management” will make the marketing organization accountable.  Building accountability requires that you first understand what kinds of marketing activity matters at your company.  In practice, this is a lot harder than it sounds.  Considerable time and energy must be spent getting disparate types of data together in one place, integrating the data together in a useful way, and then analyzing the data to find underlying relationships and build predictive models.10  All of which sounds like – and is – a lot of work. 

 
So.  CMOs – next time you need to outsource some work, think long and hard about what kind of skills you really need.  If your needs are more analytic than creative, consider adding a consulting firm to your roster, one that specializes in customer marketing and analytics.  Our holiday parties may not be as much fun, but then again – we don’t serve rubber chicken. 

Notes

  1. Unless otherwise noted, all the media buying and planning firms listed here are independent and not associated with one of the advertising holding companies. ↩
  2. Part of the holding group IPG↩
  3. Omnicom’s media buying arm. ↩
  4. Part of Leo Burnett ↩
  5. Supports McCann as part of the IPG group. ↩
  6. SeeThe McKinsey Quarterly, 2005 Number 1 Extreme Competition ↩
  7. Rick Hadala lasted 6 months from November 1998 to April 1999. APL was absorbed into Lowe 6 months later in November 1999. ↩
  8. The Six Sigma process as applied to CRM is described here very well in this article ↩
  9. Study cited is available here ↩
  10. Typically, there are three types of data you’ll need: behavioral data about the customer, financial data such as revenue, contribution margin, by product purchased (to match to each customer), and marketing activity by time period and geography. ↩

Originally published on Firewhite Consulting site, 3.05.

Comments: 0 Pin It

Retailers get a Q4 wake up call

Posted by on January 28, 2005

Neo: “That’s not possible.”
Morpheus: “I promised you the truth, Neo, and the truth is that the world you were living in was a lie.”
Neo: “How?”

Morpheus: “I’ll show you.”
—From The Matrix (1999), starring Keanu Reeves as Neo and Laurence Fishburne as Morpheus.

What if you woke up in January 2005 and discovered that much of what you thought you knew about driving shareholder value was wrong. That you’d been living — and selling — in a world that looks real but is a distorted version of the truth. That’s the situation facing major retailers as they look back on the 2004 holiday season.

Here are some of the rules that appear to have been broken this holiday season.

  • Q4 is make-or-break for retailers
  • Focus on driving traffic every day – but especially on Black Friday
  • Don’t worry about ecommerce sales – they’re icing on the cake
  • Whatever you do – avoid out-of-stocks – they’ll cost you sales during Q4

Further investigation proves that these “rules” are being followed by some retailers, those who aren’t making money. Profitable retailers know something other retailers don’t: that in the new reality of retailing, the old rules aren’t rules anymore.

Is Q4 really make or break?

Let’s take the old saw that Q4 is make-or-break for retailers. Turns out that this is not the case. Below is a chart that plots Market Value/Sales (the Y axis) against EBITDA (earnings before interest, taxes, depreciation, and amortization) as a % of Sales (the X axis) for a set of specialty retailers. Retailers “above the line” have stocks that trade at a substantial premium above the price they should get based on their market cap and earnings. Likewise, retailers below the line trade at a substantial discount. Funny thing, this chart. Only about 33% of the variation in Y (Market Value) is explained by changes in X (Earnings). The strength of a retailer’s brand, variability of earnings, and other factors account for the other 67%.

 

As it turns out, virtually all the retailers above the line deliver positive earnings not just in Q4 but throughout the year. In other words, the financial markets value retailers who are profitable 365 days a year much more than the ones who only make it happen during Q4.

This has implications for our second rule – whatever you do make sure it drives traffic every day but especially on Black Friday.

Putting Black Friday in perspective

Most retailers obsess about the promotions they run day in and day out. This obsession peaks at the end of November and Black Friday. For those unfamiliar with the term, this is the Friday after Thanksgiving when – legend has it – retailers turn the corner and magically become profitable after sloshing around in red ink for most of the year.

According to the old rules, the way to maximize your chances of seeing black ink that Friday is to field a door-busting promotion. You know the kind of promotion I mean: Give away a DVD player worth $29 to the first 500 customers who enter your doors Friday a.m., for example. The idea behind these big and splashy promotions is that people willing to line up at 4am just to get their hands on a free DVD player will drop big bucks once they get in the store.

In fact, Black Friday creates a kind of alternative reality for price seekers, a special kind of shopper, who is always and only looking for the lowest price. Loyal to no retailer, this customer will only spend money on items priced so low as to deliver the retailer almost no margin. Customers like this are worth firing – which is what Best Buy did this fall – when they went public with a plan to exorcise its “devils” – that is customers that are unprofitable and bound and determined to stay that way based on these and other behaviors. Price seekers will take each and every promotion you offer them with alacrity. What they won’t do is purchase items at full price. If you are like most brick-and-mortar retailers you’ll end up spending $50-$100 to acquire this customer only to see the customer spend less – considerably less – than this when they purchase.

Given these economics, it is no surprise that retailers like Target – which resides very much above the line – experimented with a very different kind of promotion this holiday season. Instead of using price to drive door-busting behavior, it simply asked for permission to market to the customer. Customers were asked if they wanted a wake-up call delivered by one of 10 characters, to get them into the store earlier and avoid the rush. This gave Target an opportunity to acquire customers who valued Target and also potentially to understand what kind of customer they might be acquiring. Bribes – excuse me! Free stuff just for going to Target – were not needed to drive customers as part of this promotion. Results speak for themselves. Target was one of the few retailers that reported a sales increase by 5.1% this past December 2004 vs. December 2003.

Think ecommerce last not first

Another fallacy that retailers tend to fall into come Q4 is thinking of their ecommerce sites last rather than first. The belief here is that customers will wait until the last minute to purchase gifts, which gives brick-and-mortar stores a major advantage over ecommerce retailers. This belief is based on a fallacy, that retail stores are the main way most customers want to shop and that the customers who shop through your ecommerce site are somehow not core to your business. Not so. Our work with clients suggests that high-value customers tend to shop through multiple channels and the channel they chose depends on the usage situation. During most of the year approximately 2% of revenues in the retail sector happen via ecommerce sites. During Q4, this number increases to 30%, an increase of 15x. An amazing figure when you consider that during Q4 total shopping revenues go up dramatically — by a factor of 2-3x.

Putting ecommerce first means getting your customers familiar with your ecommerce site well in advance of the holidays or any other peak buying period for that matter. Studies show that customers like to shop at sites with a familiar interface, which is why we see so many sites mimicking amazon.com in look and feel. When it comes to ecommerce, focus on the familiar vs. making your site seem novel or new.

Another way to put ecommerce first is through fielding promotions that encourage selective customers to do more buying at your website. Many retailers don’t field these kinds of promotions, fearing cannibalization. To this we say, bah humbug. Multi-channel customers deliver more value to your company. Period. Full stop. Want to accelerate growth in revenues? See if you can isolate a group of customers on your file who look like your high-value customers but who – unlike your high-value customers – are not yet purchasing through your ecommerce website. Invariably, we find that the fastest way to grow the value of these customers is to get them using multiple channels, particularly the web. Multi-channel customers like your brand, the retail experience, the merchandise assortment, or all of the above so much that they will buy from you across all usage situations.

Do out of stocks matter?

Increasingly, retailers are recognizing that no matter how much technology and smart people they throw at the problem, anticipating consumer demand is a Herculean task. Which means out-of-stocks happen, even to best-in-class retailers. And at the worst times, such as holidays. Out-of-stocks continue to matter, but not as much as they once did, thanks to stored value, the technology behind gift cards.

These little cards are truly a gift from the gods as far as the retailers are concerned. Gift cards allow retailers to shift demand from Q4 to Q1. This evens out demand, enabling retailers who don’t have the clout to get their hands on a particularly “hot” product in Q4 to make the sale anyway. And there is a host of evidence that when the customer comes back in store — gift card in hand — they’ll spend more than the face value of the card and will purchase higher-margin items that are not on sale.

We learned this holiday season that high-performing retailers have stopped lulling themselves into believing that if they wait for Q4 profits will come. Instead, they’re making profits a year-round affair. They’re making new rules up as they go along – and downloading them into the brains of their disciples. Film at 11.

— Marcia Kadanoff

Comments: 0 Pin It

Accountability

Posted by on October 19, 2004

And its impact on the lifespace of the average CMO

Splat! That sound you hear is another CMO hitting the dust. It’s September — the leaves become a brilliant, colorful mosaic, the air turns crisp and cool, and it’s hunting season for CMOs. See the folks in the orange flak jackets, armed to the teeth with Blackberrys and Mont Blancs? They’re the CEOs of public companies. See the ones running for their lives? Those poor folks are the CMOs. Their life expectancy is short. On average, a CMO lasts only 18-22 months before a CEO brings him down. It’s often not a particularly clean kill, either.

At Firewhite, we have a simple prescription for increasing the lifespan of the average CMO. It’s called accountability. For example, we build marketing scorecards that give C-level executives a quick set of metrics on how marketing is doing at driving the number of new customers acquired, increasing the lifetime value of existing customers, and in encouraging customers to move up to premium products and across into new categories. Our scorecards are built in Excel and Flash. What makes them so remarkable – apparently – is the fact that we get to do them at all.

Accountability presents something of a dilemma for marketing executives. Is it an opportunity or a threat? From a purely personal, career perspective, does it really help to be able to stand up in front of your CEO and announce that you’re managed to drive your acquisition costs down 15% across all media, or are you simply providing the rope with which you’ll eventually be hanged? After all, nobody ever got fired for branding, but you can definitely get canned for not hitting the numbers you’ve helped create.

Right? Well, wrong. Here’s why.

First, this genie is not going back into the bottle. Analytics, and the accountability they deliver, aren’t the flavor of the month. If there’s one thing CEOs are always clamoring for (along with Gulfstream G-V jets) it’s more and better information. As technology gets better, costs get lower and information gets faster, marketing gets less and less murky, and, to be Machiavellian about it, smart marketers get more and more leverage, authority and influence.

Second, by creating accountability, you’re also increasing transparency, which is only going to strengthen your cause. At bottom, the reason marketers make such tempting targets is that the lack of hard data makes everything a judgment call. If your judgment works out, great. You keep your job. But if it doesn’t, you don’t have any way to defend your decision. That, plus a nervous CEO, means you lose your job. However, if you can point to hard data and logic in defense of something you did that didn’t work out, you can demonstrate a) why you did it; and b) why anyone else would have done the same thing. Hard to fire someone for doing to obviously right thing.

Finally, accountability gives CMOs an increasingly influential role in strategy. CEOs are under more pressure than ever before to grow their businesses at a time when the markets they compete in aren’t necessarily growing. A recent study reported in the Harvard Business Review suggests that, on average, executives spend less than 3.5 hours per month1 thinking about fundamental strategic issues. Like how to grow the business. Marketing is the one organization tasked with thinking about business strategy and how it affects the customer. As such, the chief marketing officer is uniquely suited to partner with the CEO on issues of strategy, especially when it comes to growth.

So what we have here is a situation were the CEO wants and needs the CMO to work with them on strategy issues but the CMO does not necessarily have the skill set. According to Strategy + Business Magazine “The new class of strategic marketer will own the talents that, in recent years, have resided variously among consultants, agency executives, and senior strategists”2 including the ability to spot business trends early, develop business plans that deliver growth, interpret complex customer behavior, direct multiple agencies, and the intellectual security to stand up for what is right for the business while building consensus across departments.

The disconnect here is huge, which is why CMOs feel – and rightfully so – that at any given minute than can and will be fired. It’s hunting season out there and there is a big red target on the back of the average CMO. Given this, it’s not surprising that most CMOs don’t want accountability. What they want is to hide their heads in the sand and hope that this too will pass.

The reality is that it won’t. The discipline of marketing is in the midst of a colossal transformation. Marketing is becoming more strategic than ever before. Case in point: Sprint. Sprint has been in the wireless phone business for a decade. For most of this time, the company has been an also ran, trailing its peers in every number that counts, be it profits, new customer acquisition, and growth.

This is a company that only recently got smart about marketing as strategy. Its ads have always been smart, thanks to the work of Publicis and Hal Riney. It was its marketing strategy that lagged (woefully) behind. Instead of focusing on understanding who its customer was and what it needed to do to serve that customer better, Sprint focused on cutting its cost structure, in ways that exacerbated churn. For example, Sprint was one of the first vendors to experiment with Indian-based call centers for tech support, and to require customers calling with an issue to navigate a complex phone tree a/k/a “voice mail hell.” While this cut costs, it did little to endear Sprint to its customer, and the company found itself continually ranked below its peers in terms of profitability, margins, net additions (new installs minus churn), and other metrics.

At some point Sprint woke up and decided to change its marketing strategy. No doubt a new CEO — in the form of Gary D. Forsee who arrived in 2003 — helped. One of the problems Forsee inherited was a customer base that was defecting to the competition at a rapid clip. Under Forsee’s direction, Sprint decided it needed to understand the true drivers of customer attrition.3 Sprint found that customers were leaving the carrier in droves at the exact time they started to use their phones more and more. Ironically, the very thing that made Sprint great – its reliable network and voice quality that rivaled a wireline connection – was now driving customers to defect. Customers who were accustomed to using wireline phones for routine calls now felt safe using their mobile phones to handle all their calls thanks to Sprint. But these same customers quickly found Sprint “too expensive” for their everyday needs. Once their contract with Sprint ended, they moved to another carrier who could offer them more minutes for less money.

Sprint’s countered with a brilliant customer-oriented bundling strategy it calls the “Fair and Flexible Plan”. Instead of making customers feel like naughty children for going over the minutes they picked when they set up their initial contracts, Sprint simply adjusts their minutes from month-to-month based on last month’s usage. This is a win:win for both Sprint and the customer. The numbers speak for themselves. Churn: down by 2.3%. Contract length: up to 22 months on average. Revenues: up 17% over the prior year.

Other ways Sprint is growing its business is by recognizing that certain customer segments like business and the youth market are not ones it serves particularly well. Sprint is like most of the other carriers in that back in the late 1990s it overbuilt its network infrastructure and now finds itself with excess capacity. Unlike the other carriers, it decided to do something with this capacity, to market it and allow other brands to resell its service under their brand umbrella. Brands as disparate as the old standard — AT&T — and the new gonzo brand — Virgin Mobile — both rely on Sprint to provide the underpinnings of their wireless network. The result? Sprint’s market share has grown dramatically.

Driven by marketing analytics, what Sprint has learned is that the only way to grow the business is by understanding who your customer is, what they need, and building products and services that address the needs you know that customer has today as well as the ones you expect them to have tomorrow.

We see a lot of underperforming businesses like Sprint’s. The situation is not going to change until marketers wake up and recognize that they have a choice. Keep your head in the sand and become road kill. Or change the way you’re seen within your organization. Go from being a cost center to a profit center. Instead of spending money, making it. Stop any attempt at “business as usual” – it will only get you fired. Business as usual is risky business, precisely because nobody knows what value you are bringing to the business.

Or, to put it yet another way, like it or not, accountability is here to stay. And if you embrace it, well, so are you.

— Marcia Kadanoff

Comments: 0 Pin It

Marketing Dashboards and Causal Modeling

Posted by on October 7, 2004

download PDF“Hot Topics” Talk
 
As presented at the American Marketing Association in October 2004

Comments: 0 Pin It

Marketing through the Rapids

Posted by on June 30, 2004

As the economy (finally) recovers, marketers ask “what now”

Crocodiles slither from the banks into the river as they continue their risk-filled journey. He sarcastically points them out to her: “Waiting for their supper, Miss.”

Rose: Don’t be worried, Mr. Allnut.
Charlie: Oh, I ain’t worried, Miss. Gave myself up for dead back where we started.
—

From The African Queen, starring Humphrey Bogart as Charlie and Katharine Hepburn as Rose.

Things are finally beginning to look up. The African Queen is the classic story of a treacherous journey by boat through the African jungle. It may be the greatest movie ever made. Right now, on our own journey through the wilds of the business world, the trip finally seems to be getting smoother. Things are moving in the right direction. Job listings on Craigslist are up. The numbers are trending in the right direction. The economists, for the first time in a long time, have good news. The roar of the rapids is receding into the distance. What now?

For a lot of marketers, the knee-jerk reaction is to run out and hire an ad agency. It’s been a long, ugly recession, and it now seems to be ending. Let’s go get some customers! It seems to make perfect sense — when there are, finally, customers out there for the getting, why not invest in some marketing to go and get them?

Because, to paraphrase Gertrude Stein, cycles are cycles. The good times will not last forever. Advertising is great when the rising tide is lifting all boats, but when the tide goes out, you need something else. Something evergreen — something that provides you with aid and comfort both when things are going great and when, as they must, they go less well.

And the one thing that always works, always pays dividends, always makes sense is information. We refer to it as “accountability”, but the bottom line is that it all refers to understanding what’s going on with your marketing — being able to measure, and thus manage, your marketing budget.

Which brings us to our real topic here. Marketing, as we speak, is going through a profound change — its own version of a perfect storm. Several factors are converging at once to change virtually everything about marketing — what it does, how it works, how it’s viewed, and where it resides in the corporate food chain.

For decades, marketing budgets were considered discretionary. If times were lean, and you needed to cut somewhere, you could always take it out of marketing. Why? Because nobody was ever able to quantify exactly what marketing accomplished. There were a lot of theoretical discussions about the need for marketing, the benefits it provided, and so on, but unlike sales, which was always inexorably tied to a number, marketing was considerably more opaque. Given this, when the budget-makers had to wield a scalpel (or a meat-axe, depending on how bad things were) they could always take a cut at marketing. Nobody would notice anything.

That was then; this is now. Thanks to the perfect storm, it is now possible to measure exactly what you get for your marketing dollar, down to the point of being able to calculate ROI, with real numbers and real dollars.

The storm, like its natural counterpart, has three elements. The first is database technology — databases are vastly more robust, powerful and fast, and they continue to improve. The second is equally improved point-of-sale (POS) systems that enable retailers to collect and process information about their customers in real time, and in some detail. Finally, the Internet itself enables companies to tie all their information sources together, seamlessly.

When you tie all this together, you essentially create a marketing machine where money goes in one end, and results come out the other. You can measure, and quantify, cost-per-customer (both acquired and retained); spending, revenue and profitability; purchase intervals, and virtually limitless other metrics.

This, as they say, changes the whole ball game. Marketing is no longer a black hole for spending. It’s a profit center. It’s an unbelievably effective system for understanding exactly who your customer is, what she buys, what she’ll buy next. And this information is beginning to be the dog instead of the tail. It affects strategy, logistics, accounting, everything.

To use just one example, let’s look at Dell. Michael Dell is personally worth $13 billion, a fact which should get your attention. His company, Dell Computer, employs four hundred marketing analytics people — that’s one analyst for every 120 employees. That’s an enormous number of people whose job is to grind through marketing data, and draw conclusions.

And at Dell, marketing drives everything. As soon as Dell fields a marketing campaign, they know exactly what kind of results it’s delivered. This allows them to calibrate inventory, revenue projections, logistics, virtually the entire enterprise — to marketing. It has also allowed Dell to absolutely flatten every competitor, with the exception of Gateway, in the personal computer space. And Gateway is tottering.

Dell was able to accomplish this, right through a crippling consumer electronics recession, because they spend heavily on accountability for their marketing systems. They produce, and evaluate, tsunamis of information, and it has made them unstoppable. The very same thing is happening in all kinds of other industries, from apparel to manufacturing to entertainment (got iTunes yet?).

And it’s all driven by marketing, which, in turn, is driven by information. Which requires some initial, pump-priming investment. The good times are beginning to roll. Advertising and branding are the Meg Ryans of business — fun, pretty, easy to spend time with. However, when the good times stop rolling — when your boat is making its way down a crocodile-infested river in Africa, and you have to be Humphrey Bogart — do you really want Meg as your co-star? “Oh, look! Alligators! How cute!”

Eventually, the ride is going to get rough. It always does. When that happens, instead of Meg, you will assuredly wish you had someone more Katharine Hepburn-like star in your movie. A little more difficult, to be sure, and demanding of some work and some smarts. But in the long run, a much better investment, and one making it much more likely that you’ll arrive, safe and dry, at your destination.

— Marcia Kadanoff

Comments: 0 Pin It

On Differentiation

Posted by on May 21, 2004

it takes a surprising amount of courage to build differentiation into products

Sign hanging around the neck of a well dressed panhandler we spotted in downtown San Francisco: “Have Courage Will Differentiate for Six Figures”

As a marketer, it is extremely tempting to push your company to build me-too products. After all, differentiation takes courage. A me-too product that tanks is bad enough, but something new and different that fails is a really hard decision to defend. It takes real nerve to try something new, a quality that seems in short supply inside most executive suits.

cowardylionAt Firewhite, we don’t have any magic elixir that will give senior marketing people courage. This isn’t Oz, unfortunately, and we’re not the wizard who can hang a medal that says “Courage” around your neck. However, what we do have is some encouraging news. Safe and painless differentiation isn’t all that hard if you listen to what your customers are telling you, both in words and deeds.

WORDS

Every time your customer touches your company they leave behind their words. Sources of words at your company may include:

  • Customer phone calls
  • Customer mail/fax
  • E-mail/website contacts and/or support inquiries
  • Public online discussions (Internet message boards, blogs)
  • Comments in surveys/focus groups

Until very recently, unstructured data like this was simply viewed as jetsam and flotsam, too inchoate to bother analyzing. More recently, companies as disparate as Procter & Gamble and Mazda are finding that text mining can be used in much the same was as data mining: to uncover insights hidden in plain sight within unstructured data.

Case in Point: Mazda

A recent article in Business 2.01 magazine waxes poetic about how Mazda has reshaped its dealerships by installing Internet kiosks in the center of showrooms and – gasp! – encouraging customers to research pricing right then and there. Customers aged 24-35 make up the lion’s share of new car sales among the “Big 3” (Honda, Mazda, and Toyota). This target is getting harder and harder to reach through traditional media but spends a significant amount of time online. To get a better shot at this moving target, Mazda turned to text mining. It’s a surprising finding. By connecting with web-savvy bargain hunters through the medium they preferred—the Web—Mazda could engage at a deeper level with this group, and could increase revenues and margins.

DEEDS

More obviously, every time a customer interacts with your company, they leave behind a trail of behavioral data. This data can become the basis for extraordinarily effective differentiation. After all, your customers are your customers. They don’t belong to anyone else. By understanding their needs, it is possible to precisely tailor your offerings in a way that 1) separates you from the competition; and 2) makes your offerings a tighter “fit” with the needs of your particular customer.

Case in Point: Charles Schwab

Charles Schwab recently rolled out a new product offering it calls Personal Choice. By mining customer behavioral data, Schwab discovered that it served three broad groups of customers: self-directed investors, those that need help managing their portfolios and are willing to pay for it, and frequent traders. By developing different products and services for each need-based segment the company is able to create a set of highly differentiated offerings in a category that has become fixated on the $9.95 trade.2 The goal here is to focus Schwab’s customers on the value of what they are getting from their broker instead of the cost of a single trade.

ALTERNATIVES

Whole categories of products are moving to commodity status at unprecedented speed. Commoditization is the black hole3 of business—once it’s in place, it’s extremely hard to escape, and it can swallow up whole markets very quickly. Think of, for instance, the neighborhood stationery store, which has now been crushed by Office Depot, OfficeMax and Staples.

Many companies don’t realize how their own behaviors contribute to commoditization. Instead of building meaningful differentiation into their products, companies get caught up in a kind of vicious cycle where they:

  • design a new product to match the competition feature-by-feature
  • pay lip service to differentiation by adding a handful of features that don’t really matter
  • price the resulting offering at parity with the competition

Viola! Your new product is guaranteed to find success in the marketplace. After all, it offers more features for less, something important to today’s value-oriented consumer, right? There are two problems with this model.

First, eventually it drives profits down to zero or nearly zero. Feature creep is costly, particularly in categories that don’t offer a lot of margin opportunity in the first place, e.g. computers. So we see strong brands like Gateway struggling to make a go of it against such Goliaths as HP and Dell, both of whom have overpowering economies of scale Gateway lacks.

Second, and more importantly, today there is no such thing as a market serving a single type of consumer. Increasingly there is not one market but tens of smaller markets. Winning in this type of competitive environment is a matter of figuring out what tenth of the market you will dominate and crafting a strategy that allows you to do so profitably.

The way to avoid the black hole, then, is to tailor your value proposition to the market you want to own. You must convey to your customers what you will do for them, and it must be something they care about. Since everyone doesn’t care about everything, different markets demand different value propositions. A “me-too” product’s proposition is basically identical to every other product’s. A differentiated product’s is, well, different. It reflects, and speaks to, the needs of a submarket in a way it’s bigger, dumber, “me-too” cousin can’t possibly.

Case in Point: Apple

The best example of this is Apple. Apple is up against the Four Horsemen of Commoditization: Intel, HP, Microsoft and Dell. Yet, they have survived, and even thrived, by articulating a value proposition that speaks to the mini-markets they want to, and do, own: students, creative services (design, music and so on) and very high-end (and profitable) consumers seeking an integrated solution. Their proposition is, basically:

We make computers that are powerful, beautifully designed, especially good at graphics and media, and don’t have you, like everyone else, spending money that eventually goes to Bill Gates.

Is your value proposition shipshape?

A good value proposition will compel a certain group of customers to do business with your company and not your competition. A compelling value proposition has those same customers delivering incremental revenues and profits to your company year after year.

Ultimately, commoditization means competing on price alone, which isn’t really competing at all. It’s just an endless game of “who can make and sell it cheaper.” Commodity products have little intelligence built into them, and your customers have little loyalty. If the next guy can make it more cheaply, they’re gone. And so are you. Differentiation short-circuits this by, in effect, building your customers into your product. Your product is different, it’s better, and you get customers for life. Sure beats “me, too”.

Notes

  1. Source: Business 2.0 – June 04. The complete article is available to subscribers who login or via email by going to this page and requesting the full article by email. ↩
  2. At $9.95 a trade, a full-service brokerage firm like Schwab can’t make money given today’s volumes, down significantly since the height of the bubble. ↩
  3. A black hole is a region of space-time from with a gravitational pull so intense that nothing can escape. ↩

Originally published on Firewhite Consulting site, 5.04.

Comments: 0 Pin It
← Older Entries

Grab our Latest eBook on the Buyers' Journey

Download Free eBook Now