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